A new federal government will shortly take the reins, which could eventually mean some changes to Canada’s taxation laws - changes that could have an impact on the finances of Canadian physicians.
Any anticipated tax changes, based on the Liberal party’s election platform, must be considered with caution. Plans contained within a political party’s election platform, and any tax-related promises may be subject to change. Details of any formally proposed tax changes would be made available when the new federal government releases its first federal budget.
What does the Liberal party propose?
According to the Liberal Party website, the new government would seek to:
1. Cut the middle income tax bracket
Canadians with taxable annual income between $44,700 and $89,401 will see their income tax rate fall to 20.5 percent from 22 percent. This tax relief is worth up to $670 per person, per year – or $1,340 for a two-income household.
If eventually implemented, this tax cut could possibly benefit medical students with part-time jobs and residents.
2. Introduce a new tax bracket of 33 percent for individuals earning more than $200,000 each year.
What a possible new tax bracket could look like:
|Taxable Income||Proposed Additional Tax*|
*Does not include indexing
3. Cancel [family] income splitting and other tax breaks and benefits. This does not include pension income splitting for seniors.
This refers to the measure that allows some families with children under 18 to reduce their tax bill by up to $2,000.
4. Roll-back the Tax-Free Savings Account contribution limit to $5,500 from $10,000.
5. Reduce the small business tax rate from 11% to 9%, but ensure that Canadian-controlled private corporation status—this would include most Medical Professional Corporations—is not used to reduce personal income tax for high-income earners.
MD will continue to monitor any aspects of the new government’s fiscal agenda that may specifically impact physicians in Canada. Once the Liberal government formally announces their intended tax changes, your MD advisor will be available to answer your questions and provide you with more information.
Source: The Investment Funds Institute of Canada; PWC.